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The Internet search giant said its capital spending rose to $1.6 billion in the quarter, up from $774 million in the second quarter of last year. Capital expenditures were also a third higher than in the first quarter.

“CapEx is just inherently lumpy,” Google Chief Financial Officer Patrick Pichette said on the company’s conference call with investors. He noted the company was spending heavily on infrastructure, construction of data centers as well as production equipment.

AP

Google’s capital spending doubled in the second quarter from a year ago.

The spending is also affecting the company’s overall depreciation rates, because land and buildings have a longer useful life than computers and servers, Mr. Pichette said. Depreciation and amortization on Google’s property, plant and equipment grew to $747 million in the quarter compared to $520 million in the first quarter and $473 million in the year-ago quarter.

Google also mentioned its effective tax rate jumped back up to 24% in the second quarter. In the first quarter, the company’s tax rate had fallen to 8% after Congress retroactively extended the 2012 research and development tax credit, forcing companies to recognize the entire value of that credit in a single quarter.

Google Chief Executive Larry Page added that the company is still focusing on entrepreneurial investments dreamed up by its employees, such as an experiment with solar-powered balloons to offer Wi-Fi in remote areas of Asia and Africa and investments in building automatic, driverless cars.

Comments (2 of 2)

Hi Chris,
Here's Patrick's direct quote from the call. He was referring to why data centers have a longer useful life. "Clearly data centers have a long lifetime. Because if you think of them as land, electricity, power, building shells, cooling towers, all that technology has much longer useful life."

3:58 pm July 19, 2013

Teaching Assistant Chris wrote:

Emily,
I don't believe Google is depreciating its land. Land is not a depreciated under GAAP. Perhaps you mean just the buildings and other expensive long-term equipment they are purchasing.

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